Gold gained on Thursday but hovered around $50 below its record high, while the world's largest gold-backed ETF rose to a lifetime high as investors sought safety from turmoil in the financial markets.

Europe's debt crisis has burnished gold's safe-haven appeal, but speculators who lost money in stocks were also selling bullion to cover losses. Gold hit a record of $1,248.95 on Friday and has gained as much as 14 per cent this year.

Premiums for gold bars were steady in Singapore but improved in Hong Kong as jewellers returned to the physical market after prices slipped.

Spot gold was at $1,197.10 an ounce by 0500 GMT, up $6.35 from New York's notional close on Wednesday, when it dropped below $1,200 to its weakest in more than a week, partly driven by worries of long positions in Comex futures.

'There's a bit of bargain hunting. We can say we'll see some support around $1,180 and then we may start a little bit of recovery and consolidate around $1,200,' said Ronald Leung, director of Lee Cheong Gold Dealers in Hong Kong.

'I think sentiment still maintains at slightly bullish.

There are still many uncertainties around the corner. Nobody wants to dump gold too much. Only speculators dump gold.'

The SPDR Gold Trust said its holdings rose to 1,220.152 tonnes as of May 19 from 1,217.108 tonnes in the previous business day.

US gold futures for June delivery added $4.30 an ounce to $1,197.4 an ounce. The June contract had fallen four out of the last five sessions after a rally to a record high just shy of $1,250 an ounce last week.

Silver, platinum and palladium bounced higher from Wednesday's lows.

The euro held above four-year lows on Thursday on short covering by investors but sentiment was fragile with many fretting over policy disarray in the euro zone.

Dealers expected the euro's latest bounce higher against the dollar to be short-lived, with many expecting near-term resistance at around $1.2445, its May 18 high.

Investors were also worried about increased uncertainty over market regulation in the euro zone.

In the physical sector, dealers noted bargain hunting from jewellers in Hong Kong, while the discounts for gold bars in Tokyo narrowed to 50 cents from as high as $1 last week.

'We've been seeing selling from the general public recently, but liquidation seems to be slowing down this week,' said a physical dealer in Tokyo.

Japan's Nikkei average fell 0.7 per cent on Thursday, extending losses that took it to an 11-week closing low the day before, as the euro's retreat from a rebound pushed shares of exporters lower. – Reuters